Should Haverty Furniture Companies, Inc. (NYSE:HVT) Be Part Of Your Dividend Portfolio?

Want to participate in a short research study?
Help shape the future of investing tools and you could win a $250
gift card!

Could Haverty Furniture Companies, Inc. (NYSE:HVT) be an
attractive dividend share to own for the long haul? Investors are
often drawn to strong companies with the idea of reinvesting the
dividends. Yet sometimes, investors buy a popular dividend stock
because of its yield, and then lose money if the company's dividend
doesn't live up to expectations.

In this case, Haverty Furniture Companies likely
looks attractive to dividend investors, given its 4.0% dividend
yield and seven-year payment history. We'd agree the yield does
look enticing. The company also bought back stock during the year,
equivalent to approximately 4.5% of the company's market
capitalisation at the time. Some simple research can reduce the
risk of buying Haverty Furniture Companies for its dividend - read
on to learn more.

Click the interactive chart
for our full dividend analysis

NYSE:HVT Historical Dividend Yield, May 29th
2019

More

Payout
ratios

Dividends are usually paid out of company
earnings. If a company is paying more than it earns, then the
dividend might become unsustainable - hardly an ideal situation.
Comparing dividend payments to a company's net profit after tax is
a simple way of reality-checking whether a dividend is sustainable.
In the last year, Haverty Furniture Companies paid out 54% of its
profit as dividends. A payout ratio above 50% generally implies a
business is reaching maturity, although it is still possible to
reinvest in the business or increase the dividend over time.

Another important check we do is to see if the
free cash flow generated is sufficient to pay the dividend. Of the
free cash flow it generated last year, Haverty Furniture Companies
paid out 30% as dividends, suggesting the dividend is affordable.
It's positive to see that Haverty Furniture Companies's dividend is
covered by both profits and cash flow, since this is generally a
sign that the dividend is sustainable, and a lower payout ratio
usually suggests a greater margin of safety before the dividend
gets cut.

Dividend Volatility

Before buying a stock for its income, we want to
see if the dividends have been stable in the past, and if the
company has a track record of maintaining its dividend. Looking at
the data, we can see that Haverty Furniture Companies has been
paying a dividend for the past seven years. Its dividend has not
fluctuated much that time, which we like, but we're conscious that
the company might not yet have a track record of maintaining
dividends in all economic conditions. During the past seven-year
period, the first annual payment was US$0.16 in 2012, compared to
US$0.72 last year. Dividends per share have grown at approximately
24% per year over this time.

We're not overly excited about the relatively
short history of dividend payments, however the dividend is growing
at a nice rate and we might take a closer look.

Dividend Growth Potential

Examining whether the dividend is affordable and
stable is important. However, it's also important to assess if
earnings per share (EPS) are growing. Growing EPS can help maintain
or increase the purchasing power of the dividend over the long run.
While there may be fluctuations in the past , Haverty Furniture
Companies's earnings per share have basically not grown from where
they were five years ago. Over the long term, steady earnings per
share is a risk as the value of the dividends can be reduced by
inflation.

Story
continues

Conclusion

To summarise, shareholders should always check
that Haverty Furniture Companies's dividends are affordable, that
its dividend payments are relatively stable, and that it has decent
prospects for growing its earnings and dividend. First, we think
Haverty Furniture Companies has an acceptable payout ratio and its
dividend is well covered by cashflow. Second, earnings per share
have been in decline, and the dividend history is shorter than we'd
like. In sum, we find it hard to get excited about Haverty
Furniture Companies from a dividend perspective. It's not that we
think it's a bad business; just that there are other companies that
perform better on these criteria.

Without at least some growth in earnings per
share over time, the dividend will eventually come under pressure
either from costs or inflation. Businesses can change though, and
we think it would make sense to see what analysts are forecasting
for the company.

If you are a dividend investor, you might also
want to look at our curated list of dividend
stocks yielding above 3%.

We aim to bring you long-term focused research
analysis driven by fundamental data. Note that our analysis may not
factor in the latest price-sensitive company announcements or
qualitative material.

If you spot an error that warrants correction, please contact
the editor at
[email protected] This article by Simply Wall St
is general in nature. It does not constitute a recommendation to
buy or sell any stock, and does not take account of your
objectives, or your financial situation. Simply Wall St has no
position in the stocks mentioned. Thank you for reading.

Infuzes.com is the largest cannabis industry database with company profiles, an integrated smart tracker, and global analytics as a resource for cannabis professionals offering essential insights, also giving institutional and retail investors access to real-time, high-quality, reliable market and pricing data.